War—after all, what is it that the people get? Why—widows, taxes, wooden legs and debt.
Samuel B. Pettengill
"Armies, and debts, and taxes are the known instruments for bringing the many under the domination of the few.
James Madison, 4th U.S. President (April 20, 1795)
"Let me issue and control a nation's currency and I care not who makes its laws".
Nathan Rothschild, 1791
Last summer, I observed that there was a "solvency crisis" underneath the ongoing subprime mortgage liquidity squeeze. Central banks can alleviate a "liquidity crisis", but they cannot solve a solvency crisis.
Last year also, before the events, I warned that the U.S. was heading toward stagflation.
This was due to three fundamental factors.
First, the structural fiscal imbalances of the federal budget in a period of prosperity, as a result of the Bush-Cheney administration's continuous deficit spending linked to the Iraq and Afghanistan wars and to its large tax cuts;
Second, the over-indebtedness of the overall U.S. economy coupled with an overall saving rate close to zero (in 1981, it was 12 percent), and, as a consequence, the rapidly increasing foreign debt of the U.S.; and,
Third, the required decline in the U.S. dollar to reverse and correct the deteriorating American balance of payments. The second factor was a harbinger of less consumer spending in the coming months while the third factor would stoke the fire of overall inflation. And with already high budget deficits, there would be less leeway for an aggressive fiscal policy to sustain economic activity. The table was thus set for a bout of stagflation, i.e. slow growth and rising inflation.
Now, stagflation is here. —Economic growth is slowing down, M3 money supply numbers, as a measure of overall liquidity in the economy, are in the double digits range, the yield curve has inverted and become negative (short term rates higher than longer term rates) and the U.S. dollar has become one the weakest currencies in the world. All this as American twin deficits (balance of trade and federal government budget deficits) are at record levels. —As I pointed out last year, " A lower currency translates into more imported inflation and makes it difficult to maintain low interest rates," even if, in due time, it will improve the trade balance. This means that, for all practical purposes, monetary policy is also severely constrained in what it can now accomplish. For all of 2007, inflation hit 4.1 percent, which is two-thirds more than in 2006 when inflation registered at 2.5 percent. Moreover, the surge in wholesale prices announces even higher inflation in the months ahead.
With inflation being on the rise and real interest rates already in negative territory, aggressive monetary stimulus would likely be counterproductive, because too low interest rates would encourage capital outflows, pushing the dollar further down, and translating into more imported inflation. On top of that, one has to remember that monetary policy shifts take at least nine to twelve months before impacting the real economy. One has also to keep in mind that the U.S. operates, more and more, in an international environment, and is less and less capable of influencing the domestic economy by manipulating one variable only, such as the interest rate.
Of course, the Fed could have played a better preventive regulatory role if it had intervened in 2003-04 to reign in the unsound banking lending practices that have led to the subprime debacle. But the milk is out of the bottle now, and nothing can erase the damage done to the housing construction sector and other parts of the economy because of this lack of oversight.
After seven years of continuous indulging, of borrowing and debt building, the U.S. federal government is also in a fiscal bind and will find it difficult to effectively counteract the slowdown in the economy. Indeed, over the last seven years, the Bush-Cheney administration has run fiscal deficits on the average of $461.29 billion each year, for a grand total of $3,229 billion of cumulative of on-budget deficits.
This makes it harder to embark upon a new round of deficit spending to stimulate the economy. For one, fiscal policy shifts have even a longer time horizon before impacting the real economy. Secondly, the coming slowdown and recession will worsen an already high federal government deficit, as government receipts decline with the rise in unemployment and the drop in income growth. On the spending side, the Iraq war, in particular, is a black hole that siphons off more than $100 billion each year, with no end in sight. Oil prices are also very high, partly because of high world demand, partly because of geopolitical instability and partly because of the lowered dollar.
After seven years of foreign policy madness and of empire building on a mountain of debt, and of public indulging and private gouging, the financial crisis and credit crunch, the plummeting dollar, the high price for oil will all contribute to the 2008 economic slowdown, which is likely to turn into a recession, during the first half of the year, if it is not already into one since last December. The downturn in the world stock markets during this month is another clear indication that something is wrong, not only with the U.S. economy, but also with the world economy.
All that would seem to be very bad news for George W. Bush's Republicans, just as it was bad news for the Democratic Carter administration in the late '70s. Indeed, over the last century, the U.S. economy has been in a recession four times in the early part of a presidential election year, according to the National Bureau of Economic Research. In each of those years — 1920, 1932, 1960 and 1980 — the party of the incumbent president lost the election.
Rodrigue Tremblay is professor emeritus of economics at the University of Montreal and can be reached at firstname.lastname@example.org He is the author of the book 'The New American Empire'
Subprime lending is a general term that refers to the practice of making loans to borrowers who do not qualify for market interest rates because of problems with their credit history or the inability to prove that they have enough income to support the monthly payment on the loan for which they are applying. The word Subprime refers to the credit-worthiness of the borrower (being less than ideal) and does not refer to the interest rate of the loan. Subprime loans or mortgages are risky for both creditors and debtors because of the combination of high interest rates, bad credit history, and murky personal financial situations often associated with subprime applicants. A subprime loan is one that is offered at an interest rate higher than A-paper loans due to the increased risk. Subprime, therefore, is not the same as "Alt-A", because Alt-A loans qualify for the "A-rating" by Moody's or other rating firms, albeit for an "alternative" means.
The value of U.S. subprime mortgages was estimated at $1.3 trillion as of March 2007,with over 7.5 million first-lien subprime mortgages outstanding.Approximately 16% of subprime loans with adjustable rate mortgages (ARM) were 90-days delinquent or in foreclosure proceedings as of October 2007, roughly triple the rate of 2005. By January of 2008, the delinquency rate had risen to 21%.
Number of U.S. Household Properties Subject to Foreclosure Actions During 2007, By Quarter
Subprime ARMs only represent 6.8% of the loans outstanding in the US, yet they represent 43.0% of the foreclosures started during the third quarter of 2007.[A total of nearly 446,726 U.S. household properties were subject to some sort of foreclosure action from July to September 2007, including those with prime, alt-A and subprime loans. This is nearly double the 223,000 properties in the year-ago period and 34% higher than the 333,627 in the prior quarter.This increased to 527,740 during the fourth quarter of 2007, an 18% increase versus the prior quarter. For all of 2007, nearly 1.3 million properties were subject to 2.2 million foreclosure filings, up 79% and 75% respectively versus 2006. Foreclosure filings including default notices, auction sale notices and bank repossessions can include multiple notices on the same property.
The estimated value of subprime adjustable-rate mortages (ARM) resetting at higher interest rates is U.S. $400 billion for 2007 and $500 billion for 2008. Reset activity is expected to increase to a monthly peak in March 2008 of nearly $100 billion, before declining. An average of 450,000 subprime ARM are scheduled to undergo their first rate increase each quarter in 2008.
Understanding the causes and risks of the subprime crisis
The reasons for this crisis are varied and complex. Understanding and managing the ripple effect through the world-wide economy poses a critical challenge for governments, businesses, and investors. Due to innovations in securitization, the risks related to the inability of homeowners to meet mortgage payments have been distributed broadly, with a series of consequential impacts. The crisis can be attributed to a number of factors, such as the inability of homeowners to make their mortgage payments; poor judgment by either the borrower or the lender; inappropriate mortgage incentives, and rising adjustable mortgage rates. Further, declining home prices have made re-financing more difficult. There are three primary risk categories involved:
Credit risk: Traditionally, the risk of default (called credit risk) would be assumed by the bank originating the loan. However, due to innovations in securitization, credit risk is now shared more broadly with investors, because the rights to these mortgage payments have been repackaged into a variety of complex investment vehicles, generally categorized as mortgage-backed securities (MBS) or collateralized debt obligations (CDO). A CDO, essentially, is a repacking of existing debt, and in recent years MBS collateral has made up a large proportion of issuance. In exchange for purchasing the MBS, third-party investors receive a claim on the mortgage assets, which become collateral in the event of default. Further, the MBS investor has the right to cash flows related to the mortgage payments. To manage their risk, mortgage originators (e.g., banks or mortgage lenders) may also create separate legal entities, called special-purpose entities (SPE), to both assume the risk of default and issue the MBS. The banks effectively sell the mortgage assets (i.e., banking accounts receivable, which are the rights to receive the mortgage payments) to these SPE. In turn, the SPE then sells the MBS to the investors. The mortgage assets in the SPE become the collateral.
Asset price risk: CDO valuation is complex and related "fair value" accounting for such "Level 3" assets is subject to wide interpretation. This valuation fundamentally derives from the collectibility of subprime mortgage payments, which is difficult to predict due to lack of precedent and rising delinquency rates. Banks and institutional investors have recognized substantial losses as they revalue their CDO assets downward. Most CDOs require that a number of tests be satisfied on a periodic basis, such as tests of interest cash flows, collateral ratings, or market values. For deals with market value tests, if the valuation falls below certain levels, the CDO may be required by its terms to sell collateral in a short period of time, often at a steep loss, much like a stock brokerage account margin call. If the risk is not legally contained within an SPE or otherwise, the entity owning the mortgage collateral may be forced to sell other types of assets, as well, to satisfy the terms of the deal. In addition, credit rating agencies have downgraded over U.S. $50 billion in highly-rated CDO and more such downgrades are possible. Since certain types of institutional investors are allowed to only carry higher-quality (e.g., "AAA") assets, there is an increased risk of forced asset sales, which could cause further devaluation.
Liquidity risk: A related risk involves the commercial paper market, a key source of funds (i.e., liquidity) for many companies. Companies and SPE called structured investment vehicles (SIV) often obtain short-term loans by issuing commercial paper, pledging mortgage assets or CDO as collateral. Investors provide cash in exchange for the commercial paper, receiving money-market interest rates. However, because of concerns regarding the value of the mortgage asset collateral linked to subprime and Alt-A loans, the ability of many companies to issue such paper has been significantly affected.The amount of commercial paper issued as of October 18, 2007 dropped by 25%, to $888 billion, from the August 8 level. In addition, the interest rate charged by investors to provide loans for commercial paper has increased substantially above historical levels.
Understanding the impact on corporations and investors
Average investors and corporations face a variety of risks due to the inability of mortgage holders to pay. These vary by legal entity. Some general exposures by entity type include:
Bank corporations: The earnings reported by major banks are adversely affected by defaults on mortgages they issue and retain. Companies value their mortgage assets (receivables) based on estimates of collections from homeowners. Companies record expenses in the current period to adjust this valuation, increasing their bad debt reserves and reducing earnings. Rapid or unexpected changes in mortgage asset valuation can lead to volatility in earnings and stock prices. The ability of lenders to predict future collections is a complex task subject to a multitude of variables.
Mortgage lenders and Real Estate Investment Trusts: These entities face similar risks to banks. In addition, they have business models with significant reliance on the ability to regularly secure new financing through CDO or commercial paper issuance secured by mortgages. Investors have become reluctant to fund such investments and are demanding higher interest rates. Such lenders are at increased risk of significant reductions in book value due to asset sales at unfavorable prices and several have filed bankruptcy.
Special purpose entities (SPE): Like corporations, SPE are required to revalue their mortgage assets based on estimates of collection of mortgage payments. If this valuation falls below a certain level, or if cash flow falls below contractual levels, investors may have immediate rights to the mortgage asset collateral. This can also cause the rapid sale of assets at unfavorable prices. Other SPE called structured investment vehicles (SIV) issue commercial paper and use the proceeds to purchase securitized assets such as CDO. These entities have been affected by mortgage asset devaluation. Several major SIV are associated with large banks.
Investors: Stocks or bonds of the entities above are affected by the lower earnings and uncertainty regarding the valuation of mortgage assets and related payment collection. Many investors and corporations purchased MBS or CDO as investments and incurred related losses.
Causes of the crisis
Role of borrowers and the housing downturn
A variety of factors have contributed to an increase in the payment delinquency rate for subprime ARM borrowers, which recently reached 21%, roughly four times its historical level.Subprime borrowing was a major contributor to an increase in home ownership rates and the demand for housing. The overall U.S. homeownership rate increased from 64 percent in 1994 (about where it was since 1980) to a peak in 2004 with an all time high of 69.2 percent.
This demand helped fuel housing price increases and consumer spending. Between 1997 and 2006, American home prices increased by 124%. Some homeowners used the increased property value experienced in the housing bubble to refinance their homes with lower interest rates and take out second mortgages against the added value to use the funds for consumer spending. U.S. household debt as a percentage of income rose to 130% during 2007, versus 100% earlier in the decade.
Easy credit, combined with the assumption that housing prices would continue to appreciate, also encouraged many subprime borrowers to obtain ARMs they could not afford after the initial incentive period. Once housing prices started depreciating moderately in many parts of the U.S. (see United States housing market correction and United States housing bubble), refinancing became more difficult. Some homeowners were unable to re-finance and began to default on loans as their loans reset to higher interest rates and payment amounts.
According to the S&P/Case-Shiller housing price index, by November 2007, average U.S. housing prices had fallen approximately 8% from their 2006 peak. However, there was significant variation in price changes across U.S. markets, with many appreciating and others depreciating.The price decline in December 2007 versus the year-ago period was 10.4%.
Sales volume (units) of new homes dropped by 26.4% in 2007 versus the prior year. By January 2008, the inventory of unsold new homes stood at 9.8 months based on December 2007 sales volume, the highest level since 1981.
Further, a record of nearly four million unsold existing homes were available. Housing prices are expected to continue declining until this inventory of surplus homes (excess supply) is reduced to more typical levels. As MBS and CDO valuation is related to the value of the underlying housing collateral, MBS and CDO losses will continue until housing prices stabilize.
Misrepresentation of loan application data is another contributing factor. In a January 13, 2008 column in the New York Times, George Mason University economics professor Tyler Cowen wrote, "There has been plenty of talk about 'predatory lending,' but 'predatory borrowing' may have been the bigger problem. As much as 70 percent of recent early payment defaults had fraudulent misrepresentations on their original loan applications, according to one recent study. The research was done by BasePoint Analytics, which helps banks and lenders identify fraudulent transactions; the study looked at more than three million loans from 1997 to 2006, with a majority from 2005 to 2006. Applications with misrepresentations were also five times as likely to go into default. Many of the frauds were simple rather than ingenious. In some cases, borrowers who were asked to state their incomes just lied, sometimes reporting five times actual income; other borrowers falsified income documents by using computers."
Role of financial institutions
A variety of factors have caused lenders to offer an increasing array of higher-risk loans to higher-risk borrowers. The share of subprime mortgages to total originations was 5% ($35 billion) in 1994 , 9% in 1996, 13% ($160 billion) in 1999 , and 20% in 2006. A study by the Federal Reserve indicated that the average difference in mortgage interest rates between subprime and prime mortgages (the "subprime markup" or "risk premium") declined from 2.8 percentage points (280 basis points) in 2001, to 1.3 percentage points in 2007. In other words, the risk premium required by lenders to offer a subprime loan declined. This occurred even though subprime borrower and loan characteristics declined overall during the 2001-2006 period, which should have had the opposite effect. The combination is common to classic boom and bust credit cycles.
Due to securitization, investor appetite for mortgage-backed securities (MBS), and the tendency of rating agencies to assign investment-grade ratings to MBS, loans with a high risk of default could be originated, packaged and the risk readily transferred to others. The securitized share of subprime mortgages (i.e., those passed to third-party investors) increased from 54% in 2001, to 75% in 2006.
In addition to considering higher-risk borrowers, lenders have offered increasingly high-risk loan options and incentives. One example is the interest-only adjustable-rate mortgage (ARM), which allows the homeowner to pay just the interest (not principal) during an initial period. Another example is a "payment option" loan, in which the homeowner can pay a variable amount, but any interest not paid is added to the principal. Further, an estimated one-third of ARM originated between 2004-2006 had "teaser" rates below 4%, which then increased significantly after some initial period, as much as doubling the monthly payment.
Some believe that mortgage standards became lax because of a moral hazard, where each link in the mortgage chain collected profits while believing it was passing on risk.
Impact on stock markets
On July 19, 2007, the Dow Jones Industrial Average hit a record high, closing above 14,000 for the first time.[By August 15, the Dow had dropped below 13,000 and the S&P 500 had crossed into negative territory year-to-date. Similar drops occurred in virtually every market in the world, with Brazil and Korea being hard-hit. Large daily drops became common, with, for example, the KOSPI dropping about 7% in one day, although 2007's largest daily drop by the S&P 500 in the U.S. was in February, a result of the subprime crisis.
Mortgage lendersand home builders fared terribly, but losses cut across sectors, with some of the worst-hit industries, such as metals & mining companies, having only the vaguest connection with lending or mortgages.
See also: Subprime crisis impact timeline Many banks, mortgage lenders, real estate investment trusts (REIT), and hedge funds suffered significant losses as a result of mortgage payment defaults or mortgage asset devaluation. As of January 30, 2008 financial institutions had recognized subprime-related losses or write-downs exceeding U.S. $135 billion.
Other companies from around the world, such as IKB Deutsche Industriebank[, have also suffered significant losses and scores of mortgage lenders have filed for bankruptcy.Top management has not escaped unscathed, as the CEOs of Merrill Lynch and Citigroup were forced to resign within a week of each other. Various institutions follow-up with merger deals
There is a concern a few homeowners are turning to arson as a ways to escape from mortgages they can't pay or don't want to. The FBI reports that arson grew 4% in suburbs and 2.2% in cities from 2005 to 2006. As of Jan 2008, the 2007 numbers aren't out yet.
Impacts on municipal bond "monoline" insurers
A secondary cause and effect of the crisis relates to the role of municipal bond "monoline" insurance corporations. By insuring municipal bond issues, those bonds achieve higher debt ratings. However, these insurers used premiums to purchase CDO investments and have suffered significant losses, which brings their ability to insure bonds into question. Unless these insurers obtain additional capital, rating agencies may downgrade the bonds they insured or guaranteed. In turn, this may require financial institutions holding the bonds to lower their valuation or to sell them, as some entities (such as pension funds) are only allowed to hold the highest-grade bonds. The impact of such a devaluation on institutional investors and corporations holding the bonds (including major banks) has been estimated as high as $200 billion. Regulators are taking action to encourage banks to lend the required capital to certain monoline insurers, to avoid such an impact.
Impact on home owners
Further information: United States housing market correction According to the S&P/Case-Shiller housing price index, by November 2007, average U.S. housing prices had fallen approximately 8% from their 2006 peak.
However, there was significant variation in price changes across U.S. markets, with many appreciating and others depreciating.
The price decline in December 2007 versus the year-ago period was 10.4%. Sales volume (units) of new homes dropped by 26.4% in 2007 versus the prior year. By January 2008, the inventory of unsold new homes stood at 9.8 months based on December 2007 sales volume, the highest level since 1981.
Housing prices are expected to continue declining until this inventory of surplus homes (excess supply) is reduced to more typical levels. As MBS and CDO valuation is related to the value of the underlying housing collateral, MBS and CDO losses will continue until housing prices stabilize.
As home prices have declined following the rise of home prices caused by speculation and as re-financing standards have tightened, a number of homes have been foreclosed and sit vacant. These vacant homes are often poorly maintained and sometimes attract squatters and/or criminal activity with the result that increasing foreclosures in a neighborhood often serve to further accelerate home price declines in the area. Rents have not fallen as much as home prices with the result that in some affluent neighborhoods homes that were formerly owner occupied are now occupied by renters. In select areas falling home prices along with a decline in the U.S. dollar have encouraged foreigners to buy homes for either occasional use and/or long term investments. Additional problems are anticipated in the future from the impending retirement of the baby boomer generation. It is believed that a significant proportion of baby boomers are not saving adequately for retirement and were planning on using their increased property value as a "piggy bank" or replacement for a retirement-savings account. This is a departure from the traditional American approach to homes where "people worked toward paying off the family house so they could hand it down to their children".
I'm all for north.
But you are heading south.
Hope those Jersey cows are happy ones.
If you buy a house,
please, as much as possible, do it with a very high down payment.
If you can, move assets around so that you can live as debt-free as possible,
including mortgage. You might share some of this financial info with Chris if he doesn't see the urgency already.
Oh FG, we're not buying a house down there. We'll be renting my friend's house for the next three years, and will continue to rent out the 2 apartments in our house, keeping our section for when we come to town. I would never give up Vermont for any other place, especially in this country. Vermont is the #1 State when it comes to health & schools, and #2 for safest. Plus our political leaders, Sen. Leahy & Sanders are my heros.
I do have an exit plan, and one must trust the will of God.
February 1, 2008
Fitch Places $139 Billion of Subprime on Negative Watch, Cites ‘Walk Aways’
Fitch Ratings said late Friday that it had placed $139 billion of subprime RMBS on Watch Negative, the result of increased loss expecations. The rating agency said it now expected cumulative losses for the 2006 and early 2007 subprime vintages to range from 21 to 26 percent.
In Fitch’s opinion the contraction in the mortgage markets has contributed to an acceleration and deepening of home price declines, and has eliminated the option to sell or refinance a home to avoid foreclosure for many borrowers.
It’s worth noting some of the language in Fitch’s press statement — because it’s the first time any of the rating agencies have lent credence to the idea that borrowers are walking away from their homes:
"Additionally, the apparent willingness of borrowers to ‘walk away’ from mortgage debt has contributed to extraordinarily high levels of early default, which is particularly noticeable in the 2007 vintage mortgages. As Fitch has described in recent research reports, this behavior appears to be largely attributable to the use of high risk mortgage products such as ‘piggy-back’ second liens and stated-income documentation programs, which in many instances were poorly underwritten and susceptible to borrower/broker fraud."
Credit-default swaps. On the way up, they performed wonderfully for bond holders and companies alike because they allowed bondholders to protect against downside risk without actually selling a given companies bonds. This kept the corporate bond market percolating as even borderline businesses plans were able to attract capital. This was great for the economy as it kept even the most marginal enterprise humming along – at least until the trend changed. Now that everything is headed the other way, trillions and trillions in swaps have been issued. In fact, the swaps are worth way more than the bonds that they are derived from. So much more that faltering companies will be worth more to financial participants dead than alive. This means workout plans and loans in which companies survives by restructuring debts will be a thing of the past for many firms.
The walk-away response to falling home prices is another shocker, nobody thought twice about it when stocks were rising. Jim Bianco of Bianco Research says financial participants have yet to fully grasp this dynamic:
"Refusing to pay a mortgage when one has the ability to do it, because home prices are falling, is a real trend. We believe it is being fueled by the large body of borrower-friendly foreclosure laws set up over several decades. In other words, homeowners used to "beg borrow and steal" because they thought home prices only went up. So, greed drove them to do whatever was necessary to pay their mortgage in order to hold onto their home. Now that they have little-to-no equity and do not believe home prices are going to rise anytime soon, they are walking.
Here's an excert from a "60-Minutes" interview that illustrates the homeowners emerging belief that they don't have to pay their mortgages because house prices are supposed go up:
STEPHANIE VALDEZ: Why pay a $3,200 payment on a 1200-square-foot home? It makes no sense.
STEVE KROFT: That's what you agreed to do when you bought the house.
STEPHANIE VALDEZ: Fine. If the value is going up. But we're not going anywhere. The price or the value is going down. It makes no sense because we will never be able to refinance and get a lower payment. There's no way.
STEVE KROFT: You're saying, essentially, that you're going to stop making payments on it? You're just gonna let it go into foreclosure?
STEPHANIE VALDEZ: You know, that's the only advice we've gotten so far is walk away from the home. We don't want to do that to our credit. Why can't our mortgage company work with us?
As Bianco notes, the laws in many state's have been changed so that it is now "easy and convenient" for howowners to walk away. Forgiving foreclosure laws are another by-product of the easy money era. When the new tight-money era gains full control, the costs of “walking away” will increase. In the meantime, banks' real estate interests are going to be far more hands-on than they ever imagined.
Hunkering Down For The Recession
A self-reinforcing downturn has begun. The decline in December holiday sales will pull down production, adversely affecting employment, which, in turn, will reduce incomes. And lower incomes will pull down sales this winter.
We are at a significant inflection point. You may have noticed that everyone running for the White House has taken note and suddenly come up with not-so-daring stimulus programs.
Other signs of an impending recession include a 2.75% yield on two-year Treasury notes and the level of the Russell 2000 index, which isn't far from an official bear market, again according to Merrill Lynch.
What we are clearly embarking upon is a month-by-month recession watch, which will be testing for "a significant decline in economic activity, spread across the economy, lasting more than a few months"--the definition of recession at the Web site of the National Bureau of Economic Research. A unit of this bureau is the one body with the power to officially declare that we are in a recession and when we entered it.
Above all, don't be convinced that any potential recession will be short-lived, despite all the talk of the Fed jumping in or a big stimulus package barreling through Congress. The economy is like a roller coaster: It's cyclical, but it has to hit some kind of bottom before it starts to turn back up--no matter who's pushing (and how hard) at the back end.
"At the Financo dinner [Tuesday] night, CEOs from the top retailers, J.C. Penney, Neiman-Marcus, Bloomingdale's, Saks, Warnaco, Bergdorf, Levi's, Retail Ventures [Filene's] said that the fourth quarter was generally shockingly bad in different degrees to almost everyone," said Bud Konheim, CEO of Nicole Miller, the women's clothing company. "The forecast was continued pressure because of deteriorating customer confidence--oil prices, the housing market, mortgage mess, stock market."
Ahmadinejad: Israel's days are numbered
Dudi Cohen and Reuters
The Iranian president says, 'It's time to end the puppet theater of the fake regime'; adds his country is approaching nuclear 'peak'
Iran is approaching the "peak" in its nuclear program and will not yield to Western pressure to halt its activities, President Mahmoud Ahmadinejad said on Wednesday.
Ahmadinejad was speaking in the southwestern town of Bushehr near the site of Iran's planned first nuclear power plant, being built with Russian help, and predicted the country would have nuclear electricity by this time next year.
Iran: Israel too weak to confront us / Dudi Cohen
Foreign Minister Manouchehr Mottaki says Jewish state's ballistic missile capability won't help it in confrontations with Islamic republic; meanwhile, Iranian-Egyptian rapprochement in the works
"If you (Western powers) imagine that the Iranian nation will back down you are making a mistake," he said in a televised speech.
"On the nuclear path we are moving towards the peak," he said without elaborating.
Turning his attention to Israel, Ahmadinejad said, "The religious Palestinian people will bring down the last screen with its powerful hand on the Zionists' puppet theater. It's time to end the puppet theater of this fake regime."
The Iranian president noted that Israel's days were numbered and that it has reached its end.
Turning to the Western powers supporting Israel, he said, "Those who remain silent in light of this regime's crimes and support it should know that they are taking part in the bloodshed of the Palestinian people and will be tried in the future.
"The world's states will never forget these crimes," the Iranian president was quoted as saying by the Islamic Republic News Agency (IRNA).
Defying international pressure, Iran has been working on producing its own nuclear fuel, technology the West fears will be used to make atomic bombs. Tehran says its work is peaceful and has refused to stop.
He was speaking two days after Iran received the eighth and final consignment of nuclear fuel from Russia for the Bushehr plant. Tehran has said the plant will start in mid-2008, though past deadlines have slipped.
"Next year at this time ... nuclear electricity should flow in Iran's electricity network," he told the crowd.
Russia delivered the first shipment of uranium fuel rods on December 17 and urged Tehran to scrap its efforts to produce nuclear fuel. Tehran says its work is peaceful and has refused to stop.
Iran, the world's fourth-largest crude producer, says it wants to build a network of nuclear plants so it can preserve more of its oil and gas for export. It says it wants to make nuclear fuel itself to guarantee its supplies.
World powers last week agreed the outline of a third UN sanctions resolution against Iran which calls for mandatory travel bans and asset freezes for specific Iranian officials and vigilance on banks in the country.
Last edited by FirstGarden : 02-07-2008 at 11:17 AM.
WASHINGTON, Feb. 5 (UPI) -- An annual U.S. intelligence report to Congress says North Korea threatened to transfer nuclear weapons to terrorists in 2005.
The 2006 arms proliferation intelligence report says North Korean officials told unnamed U.S. officials in 2005 they "could transfer nuclear weapons to terrorists if driven into a corner," The Washington Times reported Tuesday.
The report said inspectors with the International Atomic Energy Agency recovered 2 tons of uranium hexafluoride believed to have come from North Korea in Libyan centrifuges in 2004.
The report also disclosed what it called "key suppliers" of weapons and technology, citing China's arms relations with Pakistan and Russia, and Iranian and North Korean cooperation on ballistic missiles among areas of concerns.
Al-Qaida worked on chemical and biological weapons for use in Afghanistan and Iraq and boasted of its capabilities, "but actual attempts were few," the proliferation report said.
The report also said the U.S. intelligence community would "continue to monitor Syrian nuclear intentions with concern."
Syria acquiring Russian rockets at 'furious' pace
Security official: 'It's like a return to the Cold War'
February 06, 2008
JERUSALEM – Syria, aided by Russia and Iran, in recent months has been furiously acquiring rockets and missiles, including projectiles capable of hitting the entire state of Israel, according to Jordanian and Israeli security officials speaking to WND.
A Jordanian security official said one of the main reasons Damascus did not retaliate after Israel carried out its Sept. 6 airstrike inside Syria allegedly targeting a nascent nuclear facility was because Syria's rocket infrastructure was not yet complete.
The official said after the Israeli airstrike, Syria picked up the pace of acquiring rockets and missiles, largely from Russia with Iranian backing, with the goal of completing its missile and rocket arsenal by the end of the year. The Jordanian official said Syria is aiming to possess enough projectiles to fire over 100 rockets into Israel per hour for a sustained period of time.
"The Syrians have three main goals," explained the Jordanian official. "To maximize their antitank, antiaircraft and ballistic missile and rocket capabilities."
According to Israeli and Jordanian officials, Syria recently quietly struck a deal with Russia that allows Moscow to station submarines and warboats off Syrian ports. In exchange, Russia is supplying Syria with weaponry at lower costs, with some of the missiles and rockets being financed by Iran.
"The Iranians opened an extended credit line with Russia for Syria with the purpose of arming Syria," said one Jordanian security official.
"Russia's involvement and strategic positioning is almost like a return to its Cold War stance," the official said.
Both the Israeli and Jordanian officials told WND large quantities of Syrian rockets and missiles are being stockpiled at Latakia, Syria's main port on the Mediterranean Sea, as well as at Syria's Tartus port, another major port area south of Latakia and north of Damascus.
Syria's new acquisitions include Russia's S-300 surface-to-air missile defense shield, which is similar to the U.S.-funded, Israeli engineered Arrow antimissile system currently deployed in Israel. The S-300 system is being run not by Syria but by Russian naval technicians who work from Syria's ports, security officials said.
New ballistic missiles and rockets include Alexander rockets and a massive quantity of various Scud surface-to-surface missiles, including Scud B and D Scud missiles.
Israeli security officials noted Syria recently test-fired two Scud-D surface-to-surface missiles, which have a range of about 250 miles, covering most Israeli territory. The officials said the Syrian missile test was coordinated with Iran and is believed to have been successful. It is not known what type of warhead the missiles had.
In addition to longer range Scuds, Syria is in possession of shorter range missiles such as 220 millimeter and 305 millimeter rockets, some of which have been passed on to Hezbollah.
Israel has information Syria recently acquired and deployed Chinese-made C-802 missiles, which were successfully used against the Israeli navy during Israel's war against the Lebanese Hezbollah militia this past July and August. The missiles were passed to Syria by Iran, Israeli security officials told WND.
Russia recently sold to Syria advanced anti-tank missiles similar to the projectiles that devastated Israeli tanks during the last Lebanon war, causing the highest number of Israeli troop casualties during the 34 days of military confrontations. Syria and Russia are negotiating the sale of advanced anti-aircraft missiles.
Seemingly confirming the information, Mossad Chief Meir Dagan told the Knesset yesterday Syria's military recently has accelerated its acquisition of arms. He did not list specific new weapons or disclose information about Russia's involvement.
“The military alliance between Damascus and Teheran has accelerated the arms race in the region,” said Dagan at a meeting of the Knesset's Foreign Affairs and Defense Committee.
Traditional seasons 'no longer exist'
By Ben Farmer
Traditional British winters no longer exist and spring should be brought forward because the seasons have changed so much in recent years, according to the curator of Kew Gardens.
While long, hard winter freezes which were once commonplace are now gone, trees traditionally seen as harbingers of spring are awakening months early.
Daffodils bloom at Kew Gardens, west London
Dr Nigel Taylor, curator of the Royal Botanic Gardens at Kew, said the changes were significant this year because they had affected hardy, woody plants, not just bulbs.
English Hawthorn, also known as May for flowering in that month, was already in leaf in late January, two months early. It may now flower before the end of this month.
Both Blackthorn and Common Ash are already in flower. Daffodils, crocuses and snowdrops are also early this year according to the gardens' latest data.
Daffodils bloom on a January morning
at Kew Gardens, west London
Dr Taylor said: "These are months earlier than the norm and given that they are species that have evolved in the vagaries of the English climate, the more remarkable, because one would expect them not to react so easily to milder weather in winter.
"This suggests the changes in our climate are more far reaching than previously seen."
"I think the surprising thing is this year there are some native species involved. The climate is behaving very strangely.
"No-one predicted winter was finished but these plants behaviour shows winter has ended."
He said there had been no winter in the past 12 months and described last year's weather as "extraordinary", with spring in January, a summer-like April, a cooler summer, then a warm and sunny autumn.
Asked if the start of spring should be brought forward he said: "Yes I would suggest that as a gardener.
"He added: "There is no winter any more despite a cold snap before Christmas it is nothing like years ago when I was younger."
Traditionally spring begins on the 21 March after the vernal equinox however the Met Office classes the start of the season as March 1.
A spokesman said it was unlikely the season would be changed.
He said: "I think if they would move spring they would need to move summer, it would have a knock on effect for all of the seasons.
"Botanists at Kew have been studying year-on-year seasonal changes in 100 different plants. In December they said they were concerned for the future of Britain's spring flowers because they may be flowering too early.
Some species were flowering as much as six months early in recent years, leaving their delicate flowers vulnerable to any frosts later in the year.
Scientists fear that many of the plants blooming out of season will fail to pollinate and those more suited to a colder climate will die out.
Dr Taylor also said the topsy turvey weather had made it difficult to plan and market events at the west London tourist attraction as plants can no longer be relied upon to bloom at certain times.
Early warning signs:
# English Hawthorn usually bears white flowers from the end of April or early May, but could flower as early as the end of February this year.
# Blackthorn traditionally flowers in March and April, but this year is already in flower in some places.
# Common Ash usually bears flowers from March onwards, but this year they have already arrived.
# Daffodils flowered in mid January, a week earlier than last year and around a month earlier than the average 20 years ago.
# Crocuses flowered on 24 January this year, 11 days ahead of the average this decade.
# Frogspawn was reported on Christmas Eve by the Woodland Trust, but on average appears from January to April.
# Seven spot ladybirds were sighted on New Year's day, but are traditionally seen from mid-February.
# More than 400 residents at a tortoise sanctuary in Cornwall woke up from hibernation more than a month early this year.